S&P follows Fitch/Moody’s, sanction and supporting measures

Following Fitch and Moody’s, S&P downgraded Russia’s credit rating from BB+ to CCC-.  Decision is explained by sanctions, which in agency’s view increase the possibility of default.

Since last update there was not much sanction news:

  • The US introduced limitations for some of the companies on their export to Russia. The list includes organizations primarily in defense and aerospace sectors from Estonia, Spain, the UK, Latvia, Kazakhstan, and Russia. The list has not been revealed and will become public on the 9th of March 2022
  • Individual sanctions against some Russian businessmen and the associated people with them.

The Russian government announced another package of supporting measures:

  • Inspections of small and medium businesses and IT-companies are suspended until the end of this year
  • The Central Bank of Russia is allowed to suspend operations and transactions by banks and non-credit financial institutions for up to six months in 2022. The CBR explains that this move will help to support the financial stability of the banking system
  • The Central Bank lowered earlier announced commission for Russian individuals for buying USD, EUR and GBP on the stock exchange from 30% to 12%. It also ordered to charge entities a commission of 12% as well. This will not apply to importers who can proof contractual obligations to the foreign suppliers
  • The government is allowed to additionally raise non-contributory pensions, pension points and the fixed pension payment in 2022
  • The government decided to ease the procurement of drugs and medical goods in the domestic market, introduces special rules for drug registration, allows the government to adjust terms of pharmaceutical licensing, and envisages restrictions on the exports of certain types of drugs
  • Russia’s parliament passed a law that makes it easier for the government to use the National Wealth Fund (NWF) to buy Russian stocks and government bonds.

Additionally, the government has developed three options for relations with foreign companies that have decided to leave the Russian market:

  1. The company continues its work in Russia, ensures the full supply of raw materials, materials for the production process and fulfills its obligations to employees.
  2. The foreign shareholders transfer their share under the control of Russian partners, and subsequently they will be able to return to the Russian market.
  3. The company stops working in Russia, closes production and fires employees. But the Russian authorities regard this as a deliberate bankruptcy and will intervene through the accelerated bankruptcy procedure in order to maintain employment.

 

Authors: Egor Kiselev, Head of International Business & Investment Marketing, Marina Tsutskiridze, Investment Specialist, Aleksandra Kuznetsova, Investment Specialist

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